Social Security Strategies. Understanding Spousal Survivor Benefits. Retirement SOLUTIONS 8/ A

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1 Social Security Strategies Understanding Spousal Survivor Benefits Retirement 8/ A SOLUTIONS

2 Making Social Security Work for You The Social Security eligibility rules are generally the same for everyone but no one s life, retirement goals, or financial needs are exactly the same. That s why Pacific Life has created the Social Security Strategies series of brochures. Each brochure in the series focuses on a specific strategy to consider as you and your financial professional discuss how Social Security fits into your overall plan for creating lifetime retirement income. Discuss with your financial professional everything you want out of retirement. Then, ask how to shape a sustainable retirement income strategy that s right for you.

3 Protect the Person You Love Most You and your spouse are partners who depend on each other and have built a life together. So when you re no longer there and your Social Security checks stop coming, how will it impact your spouse s lifestyle? As a survivor benefit, when one spouse dies, the surviving spouse receives the larger of the couple s two Social Security checks. But that still means the loss of one check. Let s look at a hypothetical example... A husband and his wife both receive Social Security benefits at age 66, which is full retirement age for both: While the husband is alive, they receive a combined monthly benefit of $3,000 [$2,000 (husband s monthly benefit) + $1,000 (wife s monthly benefit)]. If the husband dies first, his wife receives the higher amount of $2,000 per month as a survivor benefit. One-third of Social Security income is lost at the time of the husband s death. Strategies for Maintaining Your Income You don t need to experience a drop in income upon the death of a spouse. Two possible strategies to ensure the needed income is available are: 1. Cash/Investments Build up your savings or investments before you retire, so the needed income can be withdrawn from these assets. 2. Immediate Annuity Purchase an immediate annuity with a cash refund feature to generate extra income during retirement. Did you know? A divorced spouse who was married for more than 10 years and has not remarried can draw against the ex-spouse s work history. Widows and widowers can receive the higher of his or her own or the deceased spouse s monthly payment, but not both. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. No bank guarantee Not a deposit May lose value Not FDIC/NCUA insured Not insured by any federal government agency

4 The Cash/Investments Approach Before you retire, do some planning. You can use an income and expense worksheet to determine how much income you ll need to replace each year if you no longer receive one of the benefit checks. Let s say you would need to replace $650 per month: $650 per month x 12 months = $7,800 per year Next, think about the possibilities and decide how many years of replacement income you feel you may need. Let s assume you decide on 15 years. Then, by doing some simple math, you determine the total amount of cash you ll need to withdraw from your savings over those years: $7,800 per year x 15 years = $117,000 in total withdrawals If you decide to take this approach, here are some questions you may want to consider: Can you save the entire amount needed? If you choose to save through investments, how sure are you that your investments will perform as expected? Even if you are successful at saving or investing, what if you need the extra income longer than 15 years? Will your source of income run out? The Immediate Annuity Approach Using an immediate annuity to replace income is another strategy to consider. It is a financial product that provides you with an immediate and steady stream of income payments guaranteed to last your entire lifetime. The possible advantages of an immediate annuity include efficiency, guaranteed income for life, and a refund feature. It may be more efficient: It would take only $112,000 in an immediate annuity with a life with cash refund payout option to generate $7,800 in payments per year. 1 Based on the calculation above, that s $5,000 less than saving or investing may require. Payments are guaranteed for life: Once the annuity is purchased, the checks are guaranteed for life. No matter how long your spouse lives, the income will never run out. The refund option provides cash back: If you were to die shortly after purchasing the annuity, the annuity s life with cash refund payout option would provide your estate or beneficiaries with cash back on your $112,000 annuity purchase payment minus payments already received. 1 Amount is based on a single-life immediate annuity that has a life with cash refund option for a female age 74 as of July 2012.

5 Social Security Resources The more you know about Social Security, the better able you ll be to make the most of your benefits. For answers to your Social Security questions, talk with your financial professional. Pacific Life can also help. Take advantage of our retirement planning resources at Helpful Resources Social Security Administration (SSA) Phone: (800) Social Security Website: Online Benefits Application: Find a Local Office: Government Pension Offset: AARP Website: Windfall Elimination Provision: Pacific Life Resources Pacific Life offers financial calculators to help you plan for your Social Security needs. You can access them by visiting Social Security Retirement Income Estimator Federal Income Tax Estimator How Much of My Social Security Benefit May Be Taxed? How Does Inflation Impact My Retirement Income Needs?

6 Talk to Your Financial Professional Interested in this or other ideas for ensuring that your retirement income strategy is right for you? Talk to your financial professional. There are many options for creating a plan to help you achieve a secure financial future, and your financial professional can explain how each fits into your specific life situation. This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state, or local tax penalties. This material is written to support the promotion or marketing of the transaction(s) or matter(s) addressed by this material. Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer s particular circumstances from an independent tax advisor. Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. Insurance product and rider guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company A Exp. 8/14 Mailing addresses: Pacific Life Insurance Company P.O. Box 2378 Omaha, NE (800) In New York, Pacific Life & Annuity Company P.O. Box 2829 Omaha, NE (800)